Spain will finally not request all the funds allocated to it from the EU recovery plan. The final order will amount to around 22,000 million euros instead of just over 83,000 million euros, i.e. 25% of the total. This was confirmed by several European Union sources familiar with the recent review of the part of the recovery fund that the government is preparing and negotiating with Brussels to El Pais newspaper to face the final phase of the plan, which must be completed between the end of August and next December 31. However, Spain, the first country to receive European subsidies from this fund and second in loans, after Italy, does not give up a single euro of the non-refundable subsidies granted, amounting to 79,854 million euros.
Government sources consulted regarding this decision said: “The government is putting the final touches on a new annex to the recovery plan that will be approved by the Council of Ministers soon.” This means that the final numbers may vary, although no major changes can be expected when the Spanish executive has already communicated its intentions to the community.
Spain was expected to give up part of the recovery fund allocations that were allocated to it. The Ministry of Economy has paved the way in recent months by warning that it would prioritize support over credits, and that in the case of the latter, it would need to test demand from the private sector, because much of this money would be channeled into the economy through official lines of credit through ICOs and other similar bodies.
Today is another element that helps understand the decision taken by the government. Economic improvement and declining debt levels in recent years have led debt agencies to improve Spanish bond ratings in recent months. This means that investors demand lower premiums from the Spanish treasury and that the cost of Spain resorting to the markets to request loans is approximately the same as it does with the European Commission. For example, in 2-year bonds, the Spanish market requires a return of 2.06% and the European 2.16%, and in 10-year bonds 3.22% versus 3.13%. These last nine basis points are much lower than the 33 points for Italian ten-year bonds (3.46%) or French bonds (3.48%).
The latter, precisely, is what government sources indicate as an element to be taken into account in this decision: “Thanks to the good performance of the economy, and investor confidence, Spain maintains good access to financial markets, which practically eliminates the cost advantage of financing loans from the European Commission.”
Another point to keep in mind is that since they are credits, if they are requested in full they will be counted as public debt. This means that state liabilities could grow by about four points of GDP, although this is a dynamic measure that could be lower if the economy grows too much.
The Recovery and Resilience Fund, its official name, enters its final year in 2026 and it is necessary to reach August 31 with all requested funds and by December with all funds implemented, with some exceptions. Little time to ask and spend everything that is missing. So far, 231.2 billion of the total 291 billion in expected support and 145.7 billion of 359 billion in loans have been disbursed. For this reason, a few months ago Brussels facilitated the necessary conditions for the reform of national plans so that capitals could more easily comply with the conditions necessary to request disbursement.
In the case of Spain, just over 55,000 million have already arrived in subsidies out of the approximately 80,000 allocated and about 16,300 million in loans out of 83,000. As has happened in all countries, there is a general trend that States prioritize spending money that does not need to be returned to the Committee.
In addition, Madrid is now negotiating with Brussels on a reform of the recovery plan to facilitate the achievement of milestones and reforms pending to face the final phase. In this context, the Spanish Executive Authority had informed the Union Executive Authority of its intention to reduce the total amount of the requested appropriations.
The Spanish executive was never convinced to request all the loans from the recovery plan. In fact, it did not ask for it at first, in 2021. The first project that Spain submitted to Brussels was only considering asking for subsidies. Two years later, when the government submitted the first addition to the plan, it requested the appropriated funds. There are many in Brussels who remember that when this review was introduced, the executive presented it as a “safety net” to preserve investment.
The recovery fund was approved in 2020 to mitigate the economic impact of the pandemic, and was launched in 2021. Italy and Spain were the countries that benefited most from subsidies and credits. But there is a big difference between the two: the Transalpine people chose from the first moment to ask for all the money and all the loans, while the Spaniards were always more cautious. This has been maintained practically throughout this time.
It is not only Spain that will not request all of the appropriations allocated at the time of creating this instrument. In fact, there are quite a few countries that do not, including Germany, the Netherlands and Austria, which are countries that are in a better financial position. But not only them, France did not do that either. As for the latter, the same interpretations apply to the Spanish decision and also to the issue of prestige in the markets.